Admissions Beware: CMS Expands Definition of Prohibited Third-Party Guarantee

Federal law has long prohibited nursing homes from requiring a third party to guarantee payment of charges incurred for a resident’s room, board, and medical care. Any admission agreement containing such a guarantee is not enforceable. Nevertheless, here in New York, courts have repeatedly found admission agreements that stop short of a full payment guarantee but request or require third parties to undertake other contractual obligations may be enforceable. For example, the agreement may call on a third party to utilize their access to the resident’s income to remit payment for nursing home charges, ensure that a Medicaid application is timely filed, or provide accurate information regarding a resident’s income, resources, and transfers which may have occurred. The nursing home may then seek to recover damages from the third party if they fail to satisfy those obligations. 

However, new guidance issued by the Centers for Medicare and Medicaid Services (CMS) to nursing home surveyors significantly expands their interpretation of third-party guarantees. Under this new guidance, if an individual does not actually have legal access to the resident’s funds (such as a community spouse or an agent under a Power of Attorney), the facility may not request or require that individual to pay the facility. Noncompliant language need not specifically reference a “guarantee;” CMS lists several examples of language which will now be deemed unacceptable, including language that holds a third party liable where they fail to timely apply for Medicaid, allow someone else to spend the resident’s resources that would be used to pay the nursing home, or fail to provide accurate information about the resident’s finances. The guidance, which is currently scheduled to take effect on March 24, 2025, would directly contradict existing New York case law and prevent nursing homes from pursuing damages against third parties who sign admission agreements containing such provisions, removing a significant tool nursing facilities have for ensuring payment. 

Cona Elder Law’s experienced attorneys continue to monitor the most recent developments regarding this issue as well as other important legal matters concerning the skilled nursing facility, assisted living, and CCRC industry.  Contact us at 631.390.5000 to learn more about how our firm can help your facility preserve your bottom line and ensure your ability to continue to provide quality services to your nursing home residents. 

This article was originally posted on Leading Age New York.